Bugpowder Shit. +300. I have to stop looking. It's like 2000 BTC a minute swings.mircea_popescu Lol fascinating is it.

Bugpowder Yes it's like I'M betting! Also fascinating, who is doing this?mircea_popescu Srsly. Chinese ppl ? I have no idea. Can the addies be traced at all to anything ? Single entity ? Wide diversity ? Something in between ?

Bugpowder I wish we could trace them.mircea_popescu Isn't something like taint analysis usable in principle to do it ? You're the research scientist cum brain surgeon, do something.

Bugpowder You know more about bitcoin and network analysis than me. Not a happy account graph :)mircea_popescu So basically someone bought 200k worth of btc and bet it all ?

Bugpowder They are all going to be traced back to evorhees.mircea_popescu O ?

Bugpowder Just recycling the profits to boost the traffic. This is my new theory heheh.mircea_popescu I tell you what, if you can prove that one you're the new bitcoin star. You can even be my forum pr. Even tho you're not a girl.

Also from the man himself (privately) :

Not sure who this/these big betters are, but I'd love to know also! I'd love to know who is betting so much, and why.

So now, here's the thing : SatoshiDICE (aka S.DICE) is doing something to the tune of half a million BTC in monthly turnover. There's one hour intervals when people bet over ten thousand Bitcoins, and these occur with more than weekly frequency. The site's rake for the current month is a whopping 20`000 BTC, which makes it the most profitable Bitcoin venture of all timei and by a comfortable margin at that.

All this phenomenal success of course begs a bunch of questions, chief among them "who are these people!" (which isn't technically a question as much as a sort of English drawn out oy vey, but still, let's pretend it functions like one) and also "how do we know it's not the site doing it itself ?".

This latter one is particularly problematic because of the very nature of Bitcoin itself. You really want an anonymous currency ? Well guess what, that necessarily means you can't do business. You can't do insurance in BTC, currently, for the simple reason that you have no practical way of knowing the insured isn't betting against himself (which could eventually end up with the dreadful scenario of him making more money by failing than by succeeding).

Fortunately Satoshi was at least an inkling wiser than the large troop of monkeys populating the BTC forums and imagining they're constituting "the community" on the strength of their ignominious absence from the WoT, their flat inability to use PGP in any implementation and their collected assets of almost twenty whole Bitcoins if we count all the wallets they've meanwhile accidentally lost. Consequently, Bitcoin is not anonymous. It's pseudonymous, which is quite a different thing altogether.

It may or may not be possible to establish whether there's any truth to that suspicion (or indeed that there's no truth to that suspicion) through clever traversal of the public transaction ledger known as the blockchain. Unfortunately, in spite of what my generous friend declares I'm not much of a Bitcoin guru myself. I have a working but basic understanding of what it is and how it works, but I'm by no means in a position to be the one doing this. I am after all finance, not tech, in this rudimentary and recent division of labour that we've got going in this yet tiny corner of the virtual space.ii

Still, there's no reason my limitations would have to be yours. Quite the contrary, let's use my advantages to your advantage and vice-versa. I am hereby offering one 100 BTC reward to anyone who presents conclusive proof that either : a) the site is betting with itself or b) the site is not betting with itself. I am further offering three 10 BTC rewards to anyone that I deem has done significant service towards such conclusive proofiii.

Let the traversals begin!

And yes, I am pretty certain that the most important question we have before us in 2013 is something of this nature. I think this type of questions, logically legitimate as they may be, are one of the main drags to business development in BTC at the present time. If we manage to somehow find an answer, irrespective of what it spells out in the case at hand we will not only have made one step further on the road of actually being a community, but more importantly we'll be much better equipped to handle a much larger future, which means quite simply that the much larger future will become present, and consequently all these current tiny market caps a thing of the past.

Oh, you don't think hundreds of thousands of BTC is tiny ? Well... I guess you're not in finance.

UPDATE Erik Voorhees commented to add that if anyone comes up with some way he can prove he's not doing it he'll split the reward.

LATER UPDATE As S.DICE has been a privately held concern for a while now, this reward is no longer offered.

———

A status quite a lot more meaningful in BTC than any fiat for the reason that BTC has no inflation to gradually wash everything out, and ensure that the Beatles or Elvis Presley will eventually be surpassed in sales by people who never could even dream of playing in their league simply through dilution of what a dollar is. Consequently, the most profitable business of all time in Bitcoin will likely be set early, and definitively. This may very well be it. [↩]

And for that matter I'm pretty sure Greifeld didn't comprehend exactly what brought their system shamefully and painfully to its knees on the occasion of the FB listing. I'm mentioning this mostly to remind everyone that while we're very harsh - and rightly so! - on BTC site operators (and I am possibly harshest of all), our fiat counterparts are ordinarily doing a much worse job of it, on all scores. It's just that it's such a lame comparison, someone in BTC saying they're doing poorly but better than the pretend-banks, pretend-stock exchanghes and what have you in fiat is much akin to an able bodied kid delighting in having surpassed a paraplegic octogenarian on the Olympic track. Well, so he has, and what of it ? [↩]

Principally for but not limited to theoretical advances in the field, and also for practically usable tools that'd allow such proof be obtained in an arbitrary situation. [↩]

The rate of winning wagers can be (and is being) calculated at anytime from the blockchain data. Because all the other wagers would still be winning 98.1% of the time (as the house edge is 1.9%), the winning wagers would increase above that.

So if half of all the wagers on SatoshiDICE were from a party that knows the secret (e.g., the operators themselves) then that winning ratio would rise about 99%.

Looking at the charts doogius provides, the winning rate bounces around but is approaching the 1.9% rate.

I'm also curious if this can be figured out. The irony is that in my head I have proof that it's not me recycling the funds on SD, but how can I prove this? If I can figure out how to prove my innocence, I'll earn 100 btc :)

I will also point out that "betting with myself" would perhaps have short term advantages for me (making the site look more popular, etc) but in the medium term it would mean I'd have to pay out more to the S.DICE holders (if they're really owed 50btc in a month from legit bets, and I inflate the betting volumes, then perhaps I'll have to pay out 500btc to them).

I'll make this more interesting... if anyone knows how I can prove that I'm -not- betting against myself, please contact me and tell me, then I'll split the 100btc bounty with you.

If the outputs of the transactions that are the profit are used as inputs in new bets on the site, that would seem pretty conclusive. If the site ops were using a mixer service to swap their profit coins for other coins to use to bet on their site, you couldn't know.

@BladeMcCool Well, from what I understand the rake isn't taken out of each transaction individually, but moreover it's the result of EV. However, we can modify what you say to read "if the coins remaindered after a lost bet are used to further bet on the site", and yea, I guess it'd be pretty conclusive.

I'm not entirely sure just how well mixers work. I guess this could be a good test for the mixer principle at the same time.

The mixers work pretty damn well. About the only way to prove that the earnings are being reused is to see if the profits are going to any mixing services, instead of stock holders, and then make a big assumption about where they go next.
Actually, one way Erik could prove his innocence is by funneling all the earnings into a collection of publicly known addresses, with all the outputs declared and easily traced (some go as dividends, specified amount goes to keep being going, rest stays there), and see if the large wages continue to go on. If the sum of wages is greater than the sum pushed back onto the site to keep it going, and especially if the sum of wages doesn't change from the previous period, then that could be somewhat of a proof. Though this would depend entirely on Erik's cooperation, thanks to the publicly verifiable blockchain record this can all be publicly confirmed.

Then again, it's not quite clear how much of the 500k notional he was owing when it blew up is anything but notional.

@Rassah Well, profits going to mixers isn't necessarily proof of anything, as a legitimate user would have plenty of legitimate reasons to mix the winnings before using them for anything else.

Profits wouldn't go to stock holders directly anyway, I suppose they could go to MPEx's deposit address, but then again S.DICE is being net sold still so the operator can just not withdraw as much and never have to deposit.

I'm not sure what the "all winnings go to one address" scheme would add to what we know currently. As it is, all bets go to a set of 20 or so addresses, which are known and fixed, and it's also known which of those are losses. So it'd seem it's there anyway.

Nah, that does not work. Suppose Herp sends some btc to SDICE. If he wins, he will get the winnings back at one of the addresses he used to send from, which means that the sender is linked to the receiver, no washing occured. If he loses, he will still get a little sent at one of the addresses he used to send from, which idem.

If all the company profits are going to a set of known addresses already, anyway, then why not just see if any of the profit outputs are going to betting inputs? The profits in this case are company's, and thus only go to Erik and the stockholders, so just ask Erik not to use any mixers for a while, and see if any profits from known addresses are recycled into the bets. Sounds like it should be fairly straightforward.